Does the U.S. have a personal insolvency law ?

with all the occupy wall street going on, i was wondering, if the u.s. has a similar law as we do in europe ? where i live, someone can keep about 1000 euros a month, the rest goes to the creditors for six years, then you are debt free. no matter how much you owed.
this is supposed to help people, that probably will not be able to pay their debt back, because of unemployment, illness or because its too much to ever work it off.
with this personal insolvency there is some bureaucracy and supervision involved. i heard, that bureaucracy and supervision are not very popular in the united states. so, i was wondering, if there is something like that in the u.s..

Well, we do have personal bankruptcy laws that are similar. The laws were recently changed to the advantage of creditors, though.

Wikipedia: Bankruptcy in the United States

U.S. Bankruptcy law changed dramatically in 2005 with the passage of BAPCPA, which made it more difficult for consumer debtors to file bankruptcy in general and Chapter 7 in particular.

Advocates of BAPCPA claimed that its passage would reduce losses to creditors such as credit card companies, and that those creditors would then pass on the savings to other borrowers in the form of lower interest rates. Critic Michael Somkovic asserts that these claims turned out to be false. He charges that although credit card company losses decreased after passage of the Act, prices charged to customers increased, and credit card company profits soared.[10]

Formerly, in a "Chapter 7" bankruptcy, a debtor's "exempt" assets were collected by a trustee and sold. Considering that one filing for bankruptcy essentially had no assets that were exempt from the bankruptcy, it was just considered a wash and there was no seizure of assets.

Note that the advocates of the law claimed that the result would be that the "creditors would then pass on the savings to other borrowers in the form of lower interest rates." Yeah. As it says, their losses decreased, but prices charged to customers increased. Who would have guessed that would be the outcome....?

reply to post by Ex_CT2

thanks for your post. i have never done a personal insolvency, so i do not know if its bad or good. i wonder, if it has some side effects, you got rid of your debts but what does it do mentally ? would i have a guilty conscience for the rest of my life ?

reply to post by icepack


Unfortunately, many people still think the system works, so they hold 2 & 3 jobs just to pay interest on their debts, and to be "responsible." If more people just declared bankruptcy and walked away, the point might be made.

Good question, post. S&F